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Walgreens shifts workers to private health exchanges

Walgreens shifts workers to private health exchanges
Wednesday, September 18, 2013 - 10:24am

Walgreens will stop offering health insurance directly to its workers in 2014, instead shifting them to policies in a private insurance exchange, the company announced Wednesday.

More than 160,000 Walgreens workers will be able to buy medical, dental, vision, pharmacy and other benefits policies on an exchange run by Aon Hewitt. Walgreens will subsidize the cost of the policies.

The medical plan includes more traditional HMO and PPO policies, as well as three high-deductible plans. This year, the company only offered two high-deductible plans, where workers shoulder higher out-of-pocket costs in exchange for lower monthly premiums.

Workers will be able to see how much they will be paying, as well as how much the company chipped in toward the corporate subsidy.

"Under this new program, employees will have expanded choices to personalize their health care coverage in a competitive environment, giving our diverse workforce the flexibility they need to meet their health care needs," said Kathleen Wilson-Thompson, chief human resources officer.

Walgreens will contribute the same total share to its workforce's health care benefits next year as is did this year. Some employees, however, may see premiums rise if they pick a more generous plan, said spokesman Michael Polzin.

The company's tab for health care costs for next year remained essentially flat, allowing it to keep its contribution to workers level, he said. In future years, the company's intention is to continue picking up the same share of the cost as it does today, Polzin said.

The nation's largest drug store chain becomes the latest to radically overhaul its employee benefits plan in the months before major provisions of Obamacare kick in. UPS recently announced it would no longer cover workers' spouses who have access to health insurance. IBM and and Time Warner are moving retirees into private exchanges.

Though Obamacare does not require Walgreens to make major changes to its benefits, the company is opting to do so for several reasons. The exchange allows it to offer a wider array of insurance options and premiums to its diverse workforce. And it will give most employees and eligible retirees an opportunity to lower their out-of-pocket health care costs. Premiums could be as low as $5 a month or less, depending on the region.

Also, it helps stabilize the chain's spending on health care since it is currently self-insured, meaning it assumes the risk for paying for workers' health care usage. Under the exchange, it will transfer that risk to the insurers in the exchange, Polzin said.

Walgreens is only one of 18 large employers who have joined the corporate health exchange, Aon Hewitt said Wednesday. It did not name the other companies, though it noted that Sears Holdings and Darden Restaurants joined this year. Enrollment is expected to triple to 330,000 U.S. employees next year.

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